Homebuyers Take Advantage of Lower Rates as Mortgage Applications Rise

Mortgage applications increased 5.3% from a week ago, as the rate for a 30-year fixed loan fell to 6.3%, the lowest it has been in two months, bringing potential homebuyers back to the market.

Purchase applications were up by 8% over the week, according to the Mortgage Bankers Association, a rebound after hitting a 28-year low at the end of February.

“Incoming data last week showed that the job market is beginning to slow, which led to the 30-year fixed rate decreasing to 6.30%–the lowest level in two months,” said Mike Fratantoni, MBA’s chief economist.

Rates have remained high this year, making prospective homebuyers sensitive to any drop in mortgage rates, Fratantoni said.

"Refinance application volume was a mixed bag with total volume essentially flat, conventional volume down for the week, but VA refinance volume increasing," he said. "The level of refinance activity remains almost 60% below last year, as most homeowners are currently locked in at much lower rates."

Refinancing is also slightly up from one week ago, at 0.1%, the data show, although the number is 57% lower than the same week one year ago, with homeowners who had previously locked in at lower rates. 

The refinance share of mortgage activity decreased to 27% of total applications from 28.6% a week ago. Adjustable-rate mortgages decreased to 6% of total applications. 

The Federal Housing Authority-backed loans' share of applications increased by 0.3%, up to 12.3%. The Department of Veterans Affairs-backed loans accounted for a larger share of applications at 12.8%, up from 11% the prior week. 

Interest Rates Fall Across The Board

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased to 6.3% from 6.4%. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances fell to 6.26% from 6.36%. 

For 15-year fixed-rate mortgages, the average interest rate fell to 5.78% from 5.97%. 

Mortgages backed by the FHA decreased slightly, as well, falling to 6.29% for 30-year fixed-rate mortgages.